Super anxiously planning forced retirement

[HeyMary]

No idea why I didn't log into some of these forums a long time ago. Hope its not too late to get some advice and direction.

I am 57 y/o single never married. I have a job that every minute seems like it might blow up in my face at any time (don't ask). I'm totally stressed about it.

I have $90K cash, $400K IRA, and 2 properties combined assessed value of $900K (net of mortgage).

I'm a Canadian currently US resident. I have worked in US for required 10 years, and will be eligible for CPP at age 60 / SS at age 62 (with WEP clawback) and OAS at age 65 (doesn't trigger WEP). I also have a private pension that I had to start drawing at age 55.

So my income from pension sources will be:
Age 60: $1300 per month
Age 62: $2000 per month
Age 65: $2500 per month

My basic plan is:
* Scrape through however I can to age 60
* Sell one of the properties at age 60 and invest the $500K similar to my current holdings which have provided 5% y/o/y for the last 12 years
* Upon the sale move to mexico or further south on about $2500 per month
* Maybe towards 65 or when I get tired of expat try to find a low COL location in the US to live on about $3700 (is this even possible?)
* I guess I would also start drawing down IRA then as well

I realize this is not the greatest retirement plan.

But, I'm guessing there are a lot of Canadian/Americans kind of pushed into exile abroad.

And I have traveled a lot. I have been sincerely happy in some pretty crappy hostels and wished I could stay forever. I operate a literacy non profit here. I would probably be very happy doing some kind of similar unpaid work abroad.

I think I would hold out down south until I get sick/frail and then move back to the property I've held onto which will be mortgage free.

(the only reason I wouldn't move there sooner is, I think I would like the exile life for a while)

Would really appreciate thoughts/feedback, even encouragement...

OK I have finished my first post !

 

[FrugalLady]

Welcome! I suddenly found myself retired last month at the age of 48, so I can somewhat relate to your situation. One question, what are your current living expenses? Can you make it to 60 living in a high COL area? If it was me, I would sell your two properties now and move to a low COL area. In my area of the country, I could easily live on $3000 per month, although I don't have any debt and my interests and hobbies are very inexpensive. You could buy a house in a low COL area with a portion of your proceeds and then save the rest for living expenses until your pensions and such kick in.

I'm still pretty new to the forum, so I'm sure others will have much more detailed suggestions. Good luck!

 

[pb4uski]

HeyMary, you worry too much. For discussion purposes, let's say you can "get by" on $5k a month or $60k a year.

From now (57) to age 60, you'll spend $180k. From 60-62, you'll need $90k in addition to your $1,300/month of pension income. For 62-65, you'll need $108k in addition to your $2k/month of pension income. For 65 on, you have a gap of $2,500/month or $30k a year, which using the 4% rule suggests that you'll need $750k.

Add all of those up and you'll need $1,128k... you have $1,390k or 123% of what you need.

Have you run your numbers throuh FIRECalc?

 

[Meadbh]

I am a Canadian retiree, also single, and I could easily live on US$2500 a month with a good quality of life if I minimized my travel expenses. I live in a moderate COL area. There are many parts of Canada where COL is much lower. The reason, of course, is universal healthcare.

I presume you will not be entitled to full CPP, having worked outside Canada for many years. If you want precise projections, consider Consulting Doug Runchey at DR Pensions Consulting - Canada Pension Plan Expertise.

 

[HeyMary]

Frugal Lady, I have a "panic" roadmap. If I lose my job I will within 90 days downsize to a room share and storage locker in LA (I have to give notice on my apt.)

If I can't get any work within 180 days then I leave and cross the border. I would use the $1000 pension and use my $90K cash reserve as needed to get to age 60 (it should last 36 months pretty easily).

Thats whats kind of freaky. And I'm not sure I have the guts.

But I want to be aggressive and move fast because in my experience you can go through a lot of money looking for work (at least for professional jobs).

I've seen that happen to older friends. They're out of work, there is zero chance they'll get hired, but they spend tens of thousands before that's apparent.

(just curious which state you're in ? does $3000 cover rent and health insurance?)

MeadBH, I have 20 years work (and 44 years residency) in Canada, that included a lot of low income years in my young days and I *think* my CPP is about $650 (that's what I remember from a statement I requested about 12 years ago...I've asked for a new one).

 

[FrugalLady]

Frugal Lady, I have a "panic" roadmap. If I lose my job I will within 90 days downsize to a room share and storage locker in LA (I have to give notice on my apt.)

If I can't get any work within 180 days then I leave and cross the border. I would use the $1000 pension and use my $90K cash reserve as needed to get to age 60 (it should last 36 months pretty easily).

Thats whats kind of freaky. And I'm not sure I have the guts.

But I want to be aggressive and move fast because in my experience you can go through a lot of money looking for work (at least for professional jobs).

I've seen that happen to older friends. They're out of work, there is zero chance they'll get hired, but they spend tens of thousands before that's apparent.

(just curious which state you're in ? does $3000 cover rent and health insurance?)

MeadBH, I have 20 years work in Canada, that included a lot of low income years in my young days and I *think* my CPP is about $650 (that's what I remember from a statement I requested about 12 years ago...I've asked for a new one).

HeyMary, I live in Idaho. We get quite a few Californian's who retire here due to the lower COL. They sell their "modest" CA homes for $7 - $800,000 and buy a really nice house here for a fraction of that. We own our home outright, so no rent for us. I currently get health insurance thru a part-time job and DH is on Medicare, however, we could control our MAGI to qualify for subsidized healthcare if need be. So yes, we could pay for rent and healthcare on $3000 per month.

 

[Meadbh]

MeadBH, I have 20 years work (and 44 years residency) in Canada, that included a lot of low income years in my young days and I *think* my CPP is about $650 (that's what I remember from a statement I requested about 12 years ago...I've asked for a new one).

Mary, a 12 year old CPP statement is now completely out of date. Furthermore, be careful how you interpret the new statement of contributions. First, the rules have changed. The discount rate for taking CPP early has now increased to 0.6% per month. So if you take CPP at age 60 (60 months early) your calculated pension contribution will be only 64% of the maximum. Second, the “calculated retirement pension” assumes that you will continue to work till age 65, so it is over optimistic. In fact, the longer you wait, the more non-earning years (in Canada) will factor into the calculation of your benefits. I don’t mean to be a downer. I just don’t want you to get a nasty surprise.

 

[Major Tom]

But I want to be aggressive and move fast because in my experience you can go through a lot of money looking for work (at least for professional jobs).

I've seen that happen to older friends. They're out of work, there is zero chance they'll get hired, but they spend tens of thousands before that's apparent.

I see you're getting plenty of input from others, but wanted to commend you on your practical approach to this, and your willingness to act fast and adapt, if need be. Too many people, IMO, refuse to reduce their material standard of living when their income goes down, in the hope/expectation that their income will go back up soon. Sometimes it does, sometimes it doesn't, but I think it's important to set a cut-off point, after which you will act.

PS - I lived in Los Angeles for 20 years, and loved every second of it. It felt like a dream from which I never quite woke up, but I know not everyone feels that way about that area!

 

[NomDeER]

I get the stress. I've been facing a similar situation, though I'm a few years younger and can't go to Canada. Health insurance has been my big worry and really hard to budget for. I've also been trying to figure out how long I would give myself in a relatively high COL area to find a new job. I had decided on a year. Fortunately, it looks like I at least have a one year gig starting soon, including health insurance.

I definitely was very stressed when I found out that my office was closing and I was going to be out of a job. The best stress reliever was to run FIRECALC, review my expenses, and come up with a rough budget. When you're dealing with impending job loss and a possible job search, it can be hard to find the time, focus, and energy to do all this, but it really will help. Given what you've said about your finances, I doubt you really need to head to Mexico, though L.A. clearly is not a good option if you're not planning to work.

Years ago, I spent a year abroad doing volunteer work, and I loved it. Take your time to figure out where you would like to go and come up with a good location and volunteer gig. Figure out the details about things like insurance, storage, etc.

There is no need to just leap. You'll be fine. Depending on your definition of "scrape" and your standard of living, you probably don't have to "scrape" until 60, either. You could sell property sooner. You can tap your 401(k) at 59.5. You can find some fun, lower-paying part-time work to help.

In the meantime, you might think about whether it makes sense to convert some of the 401(k) to Roth IRAs. You might also think about whether it makes sense to go to Canada for the health care. Health insurance has been the biggest barrier to me feeling like I can ER. If I were Canadian, I'd be sleeping like a baby. The health insurance situation in the U.S. is probably the thing most damaging to my health right now.

 

[HeyMary]

Meadbh, how can i get a good sense of my CPP? I've asked for a statement that will calculate payment for retirement at 65, 62 and 60. I assumed the statement will reflect that I have not worked in Canada since 2006 (ie there will be zero contributions for every year after that time) and will include the current % reduction. I have seen forums on CPP early withdrawal etc but the advice offered is often directly contradictory. Also, I had seen Doug Runchey's services. Any experience? Is it worth the fee?

NomDeER just a question. I have a SEP and Contributory IRA (the SEP has most of holdings). Where would I go to understand benefit of converting to ROTH IRA? From what I can see that would only make sense if i expected my tax rate to be higher in future (it will be lower).

Major Tom I LOVE LA. I realize that is not a universal sentiment. But I am a beach/ocean fanatic (open water swimming). I live near the beach an honestly every day I am there I am grateful. Also love the crazy diversity.

AND ALL. One of the problems with selling is that my sister is living in one of the properties. She will be very distressed. Is it worth at least mentioning to her that we may need to start planning for 3-5 year timeframe (property is in Vancouver, all values were in US$)

The problem with selling my other property (in Victoria) is that, its the one stable and secure thing in my life. Its the place I've left to quietly appreciate knowing that if necessary return with 6 month notice to tenants and live rent free (with health care). Its one of the reasons I feel emboldened and adventurous and could disappear south or wherever.

This is a personal and family issue. I just, I am complaining I know, I just feel that losing my "refuge" , or starting to empty my IRA/RRSP, or drawing my CPP/SS early so that she can keep her home is hard luck.

 

[ncbill]

For information on retiring to Mexico, register for the forums here:

Access Mexico Connect - Current Issue - The Electronic Magazine all about Mexico

Ask there if there is a Canadian-expat specific forum/website.

IIRC, Canadian expats in Mexico enjoy much more favorable tax treatment than those from the U.S.

Might want to consider re-locating sooner rather than later in order to to delay taking your public pension(s) until you are old enough to receive the full amount.

 

[Meadbh]

Meadbh, how can i get a good sense of my CPP? I've asked for a statement that will calculate payment for retirement at 65, 62 and 60. I assumed the statement will reflect that I have not worked in Canada since 2006 (ie there will be zero contributions for every year after that time) and will include the current % reduction. I have seen forums on CPP early withdrawal etc but the advice offered is often directly contradictory. Also, I had seen Doug Runchey's services. Any experience? Is it worth the fee?

Disclaimer: I have no connection whatsoever with Doug Runchey. I did use his services, and based on the information I provided, he generated a three page report showing exactly how much CPP I would expect to receive if I started it at 60, 61, 62, 63, 64 or 65. He also provided a break even analysis showing what age I should die at to make it worthwhile to take early CPP. All the data are in 2017 dollars, so of course, the numbers will increase with COLA. He does not provide recommendations, as the best solution will depend on your situation. For me, this was very helpful and worth the cost. It was far preferable to hypothetical discussions which may not reflect my situation.

Doug also has a thread on the Canadian Money Forum, and has answered several Forum members’ questions free of charge. You may want to check that out. I could have gone that route, but I think people should be remunerated for their expertise.

I'm a CPP expert. Any questions?

Victoria BC is a great place to live in retirement. You are very fortunate to own property there. As for your property in Vancouver, $500K is at the low end of the property market, which, as you know, is hyperinflated. You might want to sell it while the going is good. Having your sister as a tenant makes it more challenging to act in your own interest.

 

[HeyMary]

Meadbh hey thanks, I checked Dave Runchey on the CPP forum, and in 2012 he was charging just $25 per calculation. That is unbelievably cheap. I'm going to hire him as soon as I can send him my CPP statement (because I'm unclear how much CPP I paid over the 22 years). The guy is kind of incredible. I just saw another chart from him with historical IYMPE] and I believe I was at the max for almost the entire period.

Maybe my sister and I can come up with something. The property has 2 units (I bought her husband out when they divorced ). The tenants are seriously great and made a soft inquiry recently about whether my sister would be interested in them buying me out so they could enter the Vancouver market. They love the neighborhood / have kids attending local schools. My sister was not happy with the idea of change and -- so didn't pursue. But, maybe I raise it when I'm up there next month.

PS $500 K = 1/2 the tax assessment x US$ conversion x 20% capital gain tax.

 

[NomDeER]

NomDeER just a question. I have a SEP and Contributory IRA (the SEP has most of holdings). Where would I go to understand benefit of converting to ROTH IRA? From what I can see that would only make sense if i expected my tax rate to be higher in future (it will be lower).

If you think that your tax rate is going to be lower in the future than it will be in the next couple of years, then conversion to a Roth IRA does not make sense. I've been looking into it because I expect my tax rate to increase at some point.

 

[HeyMary]

NomDeER, thanks. The worst is not even knowing what kind of questions to ask. GOOD TO KNOW thats a decision I won't have to worry about !

ALSO jsut FYI this is crazy but I just got called this afternoon by a real estate agent interested in my victoria house. The potential client is older and has limited mobility. The agent knows the house and thinks its perfect (only 2 front steps, able to add ramp, extra wide single shotgun hallway, only the bathroom would have to be changed to replace bath w/ shower stall, very close to walk downtown etc). Which is...kind of why its my refuge place because it had all those things for when I am getting frail. I really want to try to keep it.